Lender to Pay Fine for SCRA Violation

Lenders and car dealerships beware when repossessing cars. California Auto Finance agreed to pay $80,000 in a settlement with the Department of Justice. This is the company’s second fine for an SCRA violation.

The DOJ filed suit against California Auto Finance for repossessing the vehicle of a servicemember who had enlisted in the military. This, despite the fact the servicemember had informed California Auto Finance of his enlistment.

The Servicemembers Civil Relief Act protects servicemembers
from certain court actions while they are on active duty. One of these protections
involves making car payments. If a servicemember joins the military or gets
called to active duty after entering into an agreement to make payments on a
vehicle, whether it is a purchase or lease, the lender cannot repossess the
vehicle without a court order.

The purpose of this law is to free servicemembers from worrying about paying bills while on deployment. While they are still responsible for paying their bills, the law requires lenders to proceed with cases through the proper channels.

If, however, the servicemember enters into the agreement after they have joined the military or been called to active duty, then these SCRA protections do not apply and no SCRA violation would result from repossessing a vehicle.

Repeated Fines for SCRA Violations

In this case, the servicemember made California Auto Finance aware of the situation, but it repossessed the vehicle anyway. This, despite the fact the same company was sued by the DOJ last year for essentially committing the same offense.

The DOJ is requiring California Auto Finance to pay the most recently wronged servicemember $30,000. It is also requesting the lender pay a $50,000 civil penalty and help the servicemember repair his credit.

The DOJ is further asking the court to require the company to take steps to prevent further SCRA violations.

How to Avoid Fines for SCRA Violations

Intent can be meaningful in these types of lawsuits. A company
that repeatedly commits SCRA violations and is not making an effort to stop
will likely incur more wrath from the DOJ than a company that has made an
honest mistake and has a system set up to check the military status of its
customers.

As a lender, the first step you want to take in staying compliant with the SCRA is to perform military status verifications on any customer you are considering taking court action against. The SCRA prohibits repossessing vehicles without a court order, but you should have a military status verification in hand for any legal action you bring against a customer.

Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief Act Centralized Verification Service, located in Washington, D.C. As a recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has published hundreds of articles and hosted many webinars. His teachings help law firms and businesses to remain compliant with the SCRA rules and regulations so as to avoid costly fines.